American public pension funds are in bigger trouble than widely thought, according to the world's largest hedge-fund manager.

Bridgewater Associates said it has crunched the numbers, and that there's an 80% chance that public pensions will go bust within 50 years. In 20% of the scenarios tested by Bridgewater's "stress-test" model, they'll run out of money in just 20 years.

Bridgewater notes that public pensions have some $3 trillion in assets and $10 trillion in future liabilities. That means they need to return at least 9% a year to ensure that they can pay those obligations.

Unfortunately, the most optimistic of predictions have pensions earning just 7% to 8% per year, which would lead to a 20% shortfall. And Bridgewater believes those predictions are optimistic, indeed.

The hedge fund said it is more likely that public pensions will earn just 4% annually. That would see 85% of U.S. public pensions go bankrupt in the next 30 years.

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